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Arabica coffee futures are trading near 17-month lows, but prices are poised to grind higher.

Brazil, the source of around one-third of the world's coffee beans, had been expected to reap one of its largest crops on record. That has pushed arabica prices down 21% so far this year.

However, trouble is brewing for those forecasts—and prices should perk up through the first half of this year.

First off, dry weather has cast doubts about the Brazilian harvest. The government estimates a crop of just over 50 million 60-kilogram (132 pounds) bags for the 2012-13 crop, which begins in May. But some private estimates were near 60 million bags. Brazil's coffee trees bear fruit in alternating cycles that produce larger and smaller harvests, referred to as on- and off-cycles. This is an on-cycle season.

But due to the parched conditions, output may not soar. Joaquim Ferreira Leite—export director at cooperative Cooxupe, whose 12,000 members produce around 10% of Brazil's crop—said this year's harvest will most likely be in line with the last one, when Brazil was in a smaller, off-cycle year that produced only 43.5 million bags, according to the International Coffee Organization.

Also with prices near 17-month lows of $1.7445 a pound, one major U.S.-based coffee trader said farmers in Brazil may hold their supplies off the market to pressure prices upward before selling. This tactic recently was successful in Vietnam, the world's No. 2 producer. Coffee buyers say farmers there held off selling until prices rallied for their robusta coffee—arabica's less expensive, lower-quality cousin. Prices in London for robusta have gained 14% this year.

Also, arabica prices hit a 14-year high last May of $3.0625, and farmers "already got a taste" of those prices and probably will take steps to chase them this year, the trader said.

If dryness may clip Brazil's output, the opposite has taken a toll in Colombia and Central America. Torrential rains in those nations, which produce about 12% of the world's coffee beans, have led to tight supplies for their sought-after arabica beans, which should lend additional support to prices this year.

Arabica coffee prices will probably average $2.0587 per pound this year, Société Générale forecast in a report late last month. On Friday, arabica for May delivery settled at $1.7920 a pound, down 2.1% on the week.

Global demand for coffee is growing steadily—at about 2% annually for several years. A return to prices above $2 a pound, could open the floodgates for another move toward the multiyear highs hit last year. More bullish news should be in store for next season.

If prices can firm even with an on-cycle Brazilian crop, it is safe to expect a bigger rally ahead of the 2013-14 season, since Brazil will be in an off-cycle. Expect prices to start rising again in the second half of the year in anticipation.

The market for coffee and the farmers who grow the beans have been subjected to boom and bust cycles throughout history. But while prices recently have fallen, the days of low-priced coffee appear to be over.